LONDON (ICIS)--AkzoNobel’s decision to invest in its most expensive European plant expansion shows how positive the growth prospects are for the company’s chlorine business, a senior executive told ICIS on Tuesday.

The Dutch coatings and chemicals group said it is investing €140m ($200m) to convert its 165,000 tonne/year chlorine plant in Frankfurt, Germany, to the latest membrane technology with a start-up scheduled for the fourth quarter of 2013.

Polyvinyl chloride (PVC) is a key end-use for chlorine, consuming around 70% of European chlorine production. Many PVC manufacturers are experiencing poor margins as the key construction end-use market is still in decline. The sector collapsed in the wake of the 2008 financial crisis.

Knut Schwalenburg, managing director of subsidiary AkzoNobel Industrial Chemicals, said PVC markets in Europe are not in good shape but that other downstream uses for chlorine, such as polyurethane (PU) and epoxy resin, are performing well.

“Take out PVC and the industry is at pre-crisis levels,” he said. “We’re confident that chlor-alkali is still growing at half of GDP, so, long term, there will be growth in chlorine.”

He said that conditions for PVC vary widely across mainland Europe, with southern European countries suffering poorer demand than elsewhere. Schwalenburg also said that earlier reports that 500,000 tonnes/year of chlorine capacity could be standing idle across Europe could be accurate.

“That’s not so much out of a total of 10m tonnes,” he also said. “Some players are sold out, especially those serving fast-growing segments like polyurethane, which is growing at 5–7% a year.”

Schwalenburg insists that European chlor-alkali producers can compete with players in lower-cost countries such as China: “India is not really a player in chlor-alkali. China is huge, but has a huge local market.

“This is not a labour-intensive industry. It uses a lot of energy and salt, in which Europe is competitive. When you add transport to the total costs then Europe can compete.”

He also believes that the cost of carbon is already included in energy pricing in Europe and should not increase further. “Energy prices will not differ so much globally as they are mostly linked to crude oil,” he said.

Schwalenburg said the 150,000 tonne/year chloromethane capacity at the Frankfurt site is to increase by 20% to take advantage of the higher availability of chlorine from the new project. A relatively small investment, therefore, should allow debottlenecking to be completed by the fourth quarter of 2013.